Post Office Schemes in India 2020
Posted by Fintra Editor , June 2, 2018
EVERYTHING YOU NEED TO KNOW ABOUT POST OFFICE SCHEMES INDIA IN 2020
Post offices are not just about circulating letters and parcels. Since a long time back, the Department of Posts in India has offered many investment plans and schemes for personal finances. These micro-finance investment plans are commonly referred to as “Post Office Schemes”.
As far as investment schemes go, these schemes are a safe and stable option, which is why many senior citizens invest their money in Post Office Schemes. If you are looking to invest in such a scheme, this article has got you covered. We have prepared a list of everything you need to know about Post Office Schemes India in 2018.
WHAT ARE THE DIFFERENT TYPES OF POST OFFICE SCHEMES?
There are a variety of Post Office Schemes to choose from, each plan with its unique features and benefits. Here is a list of all the schemes offered by the Department of Post Office-
POST OFFICE SAVINGS ACCOUNT
- Under this scheme, you can open your account only by cash. The minimum amount required to open an account is Rs 20.
- This scheme offers an interest rate of 4% per annum, both on individual and joint accounts.
- You can transfer your post office savings account from one post office in India to another.
- A savings account may either be an individual or a joint account. The maximum number of members of a joint account can be three adults.
- You have to make at least one monetary transaction every three financial years, be it a deposit or a withdrawal.
- This scheme allows you to avail ATM facility.
- 5-YEAR POST OFFICE RECURRING DEPOSIT ACCOUNT
- Under this scheme, you can open an account by either cash or cheque.
- As of 2018, this scheme will offer you an interest rate of 6.9% per annum, on a quarterly compounded basis.
- This type of account too can be transferred from one Indian post office to another.
- A maximum of two adults can hold a joint account.
- If you make an advance deposit of at least six installments, you can expect a rebate.
- After one year, you can withdraw as much as fifty percent of the total balance of the account.
POST OFFICE TIME DEPOSIT ACCOUNT
- Under this scheme, you can open your account with either cash or a cheque.
- As of 2018, the interest rates on deposit accounts are 6.6% on a one-year account, 6.7% on a two-year account, 6.9% on a three-year account, and 7.4% on a five-year account.
- It is pretty similar to a recurring deposit account in terms of being transferrable from one post office to another, a maximum of two adults being allowed to hold a joint account, and a nomination facility being available.
- POST OFFICE MONTHLY INCOME SCHEME ACCOUNT
- This kind of account, like most post office schemes, can be opened by both cash and cheque.
- As of 2018, the interest rate is 7.3% per annum.
- This account also offers a nomination facility.
- Maximum three adults can hold a joint account, all account holders have equal share and rights.
- The account can be transferred from one post office to another.
SENIOR CITIZEN SAVINGS SCHEME
- As the name suggests, this scheme is exclusively for the elderly.
- An individual should be 60 or more in order to open an account under this scheme.
- As of 2017, the interest rates payable are 8.3% per annum.
- This scheme has a maturity period of five years.
- For an amount under Rs 1 lakh, the account can be opened via cash. For an amount above 1 lakh, however, you have to open the account through cheque.
- Only the spouse can be the joint account-holder. You can open as many accounts as you want. The account is transferrable.
15-YEAR PUBLIC PROVIDENT FUND ACCOUNT
- You need a minimum of Rs 500 to open a PPF account in a post office.
- As of 2018, the rate of interest payable is 7.6% per annum. This interest is tax-free.
- This type of scheme does not allow joint accounts.
- The account will mature after fifteen years. Before that, you cannot close the account.
- The account is transferrable and offers nomination facilities.
- From the third financial year of the account, you can avail of loan facilities.
NATIONAL SAVINGS CERTIFICATES
- You need a minimum of Rs. 100 to open an account.
- As of 2018, the rate of interest payable is 7.6%, to be compounded annually.
- A certificate can be purchased by an adult, for himself or herself, or for a minor.
- There are tax rebates imposed on the deposits.
KISHAN VIKASH PATRA
- A minimum of Rs 1000 is required to open an account.
- As of 2018, the rate of interest payable is 7.3%, to be compounded annually.
- Again, an adult can purchase a certificate, either for himself or herself or for a minor. Nomination facilities are available.
- The amount will be doubled after a time period of 118 months.
- The certificate can be cashed only after at least two and a half years.
SUKANYA SAMRIDDHI ACCOUNTS
- The rate of interest is 8.1% per annum, to be compounded yearly.
- The minimum amount required to open an account is Rs 1000. Deposits can be in a lump-sum or on a regular basis.
- This type of scheme is for the welfare of the girl child and can be opened for female children only. It is commonly referred to as the “girl child deposit scheme”.
- The legal or natural guardian can open the account on behalf of the girl child.
- To keep the account active, a minimum deposit of Rs 1000 must be made every year.
- After the child reaches 21 years of age, the account can be closed.
WHAT ARE THE DIFFERENCES BETWEEN POST OFFICE SCHEMES AND FIXED DEPOSITS?
This is one of the most FAQs of investors, especially the first-timers. Most investors are confused between postal office schemes and fixed deposits. They wonder which one would be better for them. However, it all boils down to the investor’s needs, conveniences, and financial goals.
If you are looking for a reliable, stable option, then you should go for post office schemes. The interest rate of post office schemes is pretty much fixed, while the interest rates of a bank FD may go up or down, depending on the economy. Thus bank Fixed Deposits are riskier, but there is also a chance of a higher reward.
In the case of bank Fixed Deposits, the minimum deposit amount is usually higher than that of a post office account. You must be an Indian to open a post office scheme, but there are no such restrictions in case of a bank Fixed Deposits. In fact, many banks offer a higher rate of interest to NRI investors. A post office account can be closed after six months but before one year. After that, you cannot close your account before its completion. On the other hand, most banks nowadays allow premature withdrawal or closure of accounts.
So here are the comparisons between post office schemes and fixed deposits. Do a thorough research of your own, weigh in your options, and then choose carefully.
HOW CAN YOU OPEN A POST OFFICE SCHEME?
Opening up a post office account is pretty simple, really. The minimum amount required for each scheme is stated above, as well as the required deposits to sustain the accounts. All you have to do is go to your nearest post office and talk to the branch superior and follow the below-mentioned steps.
- Fill the form appropriately and submit with a Xerox copy of your ID, residential proofs, and 2 passport-size photos at the post office. You should also carry your original documents for verification
- You will have to get the signatures of your witness/nominee on the form.
- Make the initial deposit via cash or cheque/post-dated cheque
Of late, the central government has authorized all public sector banks and private ones like ICICI Bank, Axis Bank, and HDFC Bank to allow investors to open Post Office Schemes.
EARLY WITHDRAWAL FROM POST OFFICE SCHEME
For a long time now, post offices of India have been offering investment schemes for personal, small-scale finance. Risk-free and stable, these post office schemes are very much preferred by the elderly, as they find such investment options reliable.
The Post Department of India offers several types of investment schemes, such as-
- Post Office Savings Account
- Post Office Recurring Deposit Account
- Senior Citizens Savings Scheme
- Post Office Monthly Income Account Scheme
- 15 year Public Provident Fund Account
- Kishan Vikash Patra
- Sukanya Samriddhi Accounts
- National Savings Certificate
These schemes have different rates of interest as well as different maturity periods. Premature withdrawal is allowed on most schemes. The conditions on premature withdrawal or closure in the schemes are-
- In the case of the Post Office Savings Account, premature withdrawal is allowed after one year of opening the account.
- For Post Office Recurring Deposit Account, the tenure is 5 years. However, after one year, a withdrawal of about 50% of the balance can be made. In case of the death of the subscriber, full maturity value can be received by the nominee if he or she is able to fulfill certain conditions.
- Senior Citizens Savings Scheme has a maturity period of 5 years. Premature closure is allowed after 1 year. In that case, however, there is a 1.5% deduction of the deposit.
- The Post Office Monthly Income Scheme, too, takes 5 years to mature. You can prematurely en-cash the account after 1 year but upon a deduction of 2% of the deposit.
- The Public Provident Fund Account takes 15 years to mature. Premature closure is not allowed. However, one withdrawal can be made every year after the completion of 7 years of the account.
- The Kishan Vikash Patra scheme allows the certificate to be cashed after two and a half years of issuing it.
- In the case of Sukanya Samriddhi Accounts, the account can be closed after 21 years. Partial withdrawal of about 50% of the deposit is allowed after the girl child is of 18 years. Premature closure can also be made after the child reaches 18 years of age, but only in case of marriage or higher education.
- The NSC takes 5 years to mature. Premature closure or withdrawal is not allowed.
POST OFFICE SCHEME VS MUTUAL FUNDS
In the previous articles, we have talked about different kinds of post office schemes, their features, the pros, and cons, how to invest in them, etc. When it comes to investment options, many people are confused about whether to invest in a post office scheme. Well, in that case, fret not reader, for in this article we will compare the features, drawbacks, and benefits of post office schemes and mutual funds. After reading this article, you can make the investment choice that suits your financial needs and preferences the most.
When it comes to choosing between a post office scheme or mutual fund, here are some following features worth considering-
RATE OF INTEREST
Post office schemes are sponsored by the Government of India. So, as an investment option, it is definitely safer than a mutual fund. For most post office schemes, the rate of interest is fixed, payable monthly, quarterly, or annually. Also, post office schemes offer a maturity bonus. Mutual funds, on the other hand, offer better liquidity and returns. However, they do not have any fixed rate of interest and their returns depend on the condition of the market. In mutual funds, you can either make a big gain or a big loss. There is no such gambling in post office schemes. So, if are ready to take a risk in order to make a chunk of money, go for mutual funds. If you want your money to be safe and can settle for a lower rate of interest as long as it is regular and stable, stick to post office schemes.
Mutual funds offer a monthly dividend that is subjected to a dividend distribution tax of 13.84% for individuals. If you choose to sell the units within a year of opening the account, then the gain would be subjected to your income tax slab. If you sell the units after the completion of one year, then you would gain a 10% long-term capital gain tax.
The interest income of post office schemes is subjected to the subscriber’s personal income tax slab. However, most post office schemes are eligible for tax exemption under Section 80C of the Income Tax Act of 1961.
WHICH ONE SHOULD YOU INVEST IN?
To answer that question, you should go through this article. When it comes to investment options, there are no good or bad choices. It all depends upon your personal financial goals and needs. If you are looking for higher returns, it is advisable that you invest in a mutual fund. However, you should invest in a mutual fund with a maturity period of at least 2-3 years. On the other hand, if you do not want your money to be exposed to the capricious market and just want regular amounts of a fixed return, the post office scheme is perfect for you.